Turn Around

A global distributor implemented a new sales strategy changing its method of going to market. One Year after implementation, a very profitable company was losing $2 Million per month.

Issues:

  • The strategy was not accepted by the sales force and in turn sales were plummeting.
  • An extremely successful and profitable company had become unprofitable and the monthly losses were growing.
  • Employee moral was at an all time low. Key employees were leaving the company.
  • Management did not know what to do.

Actions taken:

  • A complete assessment of the organization was completed.
  • Implemented a new sales rep’s compensation plan - a simplified variable commission plan based on a percentage of gross profit.
  • A comprehensive cost reduction plan was implemented focusing on “low hanging fruit” in the Operating expenses.
  • A vendor rationalization analysis was performed and vendors were consolidated.
  • A distribution center rationalization was performed and a lean process was implemented.
  • Packaging was outsourced to enable the company to focus on its primary strengths.
  • A national account strategy was developed to target the larger more profitable accounts.
  • A conscious retrenchment strategy was implemented to move away from smaller, less profitable customers.
  • A re-engineering of the Accounts Receivable process was completed.
  • An ERP system was selected and implemented.

Results:

  • Revenues had increased by 25 % or $25 million in the first year.
  • The $2 million per month loss had become a $3 million per month profit.
  • $37 million in free cash flow had been generated.
  • Expenses were reduced by 30% or $30 million in the first year.
  • Cost of Sales was reduced by 5%.
  • DSO was reduced by 12 days generating $8 million in cash flow.
  • The ERP system provided the infrastructure to acquire and integrate other companies once the turn-around was completed.

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